Indian Irrigation Company Cut to ‘Selective Default’ by S&P
(Source: Jain Irrigation’s verified twitter handle)

Indian Irrigation Company Cut to ‘Selective Default’ by S&P

(Bloomberg) -- An Indian irrigation firm has been cut to “selective default” by S&P Global Ratings, as more cracks emerge in India’s offshore junk bond market.

Jain Irrigation Systems Ltd. missed certain principal payments under its working capital facilities and S&P sees a “high likelihood” that the company would be classified as a nonperforming asset by its bankers. A selective default means S&P believes a firm has defaulted on a specific issue but will meet its other obligations.

“In our view, there is a significant likelihood that Jain Irrigation’s liquidity crunch would spread to its international business, leading to a default on its U.S. dollar bonds as well,” S&P said in a statement.

The company hasn’t received any recall notices from its dollar bondholders, a representative for Jain Irrigation said in an email reply to a Bloomberg News query. Advisory firm Brescon & Allied Partners LLP has been appointed as the restructuring consultant by the lenders and the company will honor its financial obligation toward its bondholders on the due date., the company said.

Indian Irrigation Company Cut to ‘Selective Default’ by S&P

Delayed collection of government receivables and erratic monsoons in India continue to stress Jain Irrigation’s cash flows, according to S&P. The company’s financial stumble comes after a unit of Reliance Communications filed for bankruptcy protection last month, as a funding crunch due to turmoil in the shadow banking system sours sentiment in the nation’s debt market.

Key highlights

  • “We believe the cross-default clause under the company’s guaranteed senior unsecured notes may also be triggered by virtue of Jain Irrigation being a guarantor and obligor on the notes,” S&P said.
  • S&P also lowered the rating on Jain Irrigation’s $200 million senior notes to CC, saying that “default is a virtual certainty, barring unforeseen, material positive developments” in the company’s operations and relationships with lenders.
  • Jain Irrigation’s 2022 dollar bond, which is callable next February, was indicated about 0.7 cent lower on the dollar Tuesday at 49.7. The bond was trading at about 93 cents as recently as early June.
  • CreditSights wrote that it doesn’t expect the company’s liquidity position to improve materially given stress in India’s banking system.
  • Care Ratings earlier cut the company’s facilities rating to D.

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